Banking and Finance in China

Banking reform was initiated in China in 1994, and the Commercial Banking Law
took effect in July 1995.

The aims of these actions were to strengthen the role of the central bank—the
People’s Bank of China—and to allow private banks to be established.
The People’s Bank of China was established in 1948. It issues China’s
currency and implements the nation’s monetary policies. China’s
oldest bank, founded in 1908, is the Bank of Communications Limited, a commercial
enterprise located in Shanghai. China’s second oldest bank was established
in 1912 as the Bank of China. Since 2004 it has become a shareholding company
known as the Bank of China Limited and handles foreign exchange and international
financial settlements. The Agricultural Bank of China, founded in 1951, is mainly
involved in rural financing and the provision of services to agricultural, industrial,
commercial, and transportation enterprises in rural areas.

Other major banks include the China Construction Bank; established in 1954
as the People’s Construction Bank of China, it has been a state-owned
commercial bank since 1994 and maintains some 15,400 business outlets inside
and outside China, including six overseas branches and two overseas representative
offices. The China Construction Bank was restructured in 2003 into a shareholding
bank called the China Construction Bank Corporation, with the state holding
the controlling shares. The China International Trust and Investment Corporation
was founded in 1979 to assist economic and technological cooperation, finance,
banking, investment, and trade.

The Industrial and Commercial Bank of China was founded in 1984 to handle industrial
and commercial credits and international business. The Agricultural Development
Bank of China, Export and Import Bank of China, and State Development Bank all
were founded in 1994. China’s first private commercial national bank,
the China Minsheng Banking Corporation, was opened in 1996. Commercial banks
are supervised by the China Banking Regulatory Commission, which was established
in 2003. In 2005 the commission announced the launching of a new postal savings
bank to replace the old system and its more than 36,000 outdated outlets nationwide.

When first permitted in the mid-1980s, foreign banks were restricted to designated
cities and
could deal only with transactions by foreign companies in China. After those
restrictions were
loosened following China’s accession to the World Trade Organization in
2001, some foreign
banks have been allowed to provide services to local residents and businesses.
In 2004 there
were some 70 foreign banks with more than 150 branches in China.

There are stock exchanges in Beijing, Shanghai (the third largest in the world),
and Shenzhen
and futures exchanges in Shanghai, Dalian, and Zhengzhou. They are regulated
by the China
Securities Regulatory Commission.